Wednesday 28 July 2010

Banks and Basel 3: Asking kids to mark their own homework

One of my colleagues sent around a bloomberg article which stated that Westpac (the Aussie bank) had opined that the Basel 3 rules were flawed and risked constraining lenders! Wasn't it unconstraining lending that help get us into the GFC (global financial crisis for non-aussies)?

Why anyone would care what any bank thought of attempts to regulate it remains beyond me. One of the major problems of Basel 2 was that banks were allowed to use their own risk models to value assets. This is akin to asking kids to mark their own homework, one shouldn't be surprised when they report they got 100% correct.

Talk about not learning from mistakes. Hasn't anyone heard of regulatory capture?


bb said...

you've twice mistyped Basel.

Anonymous said...

You missed the part whereby minority shares in other financial firms are allowed to be counted as capital!

Anonymous said...

Received $2.5Millions from is a short-term global investments offerring company, just launched in March 2010. We offer two types of plans for you to choose: 3000%-9000% of your deposit after 24 hours or 2000%-6000% of your deposit after 12 hours ! Payouts are sent 7 days a week, even on weekends! You don't need to go to banks or financial institutions to purchase the plans, cause we enable you to purchase it via Liberty Reserve payment system, online and instantly!
The daily profit is solid, and paid to your Liberty Reserve accounts directly 7 days a week, even on weekends! All the payments due will be calculated and transfered to the LR account you deposit from, no withdrawal request required! And usually the payouts reach to your accounts within 24 hours, after your deposits are successfully made!
Together with us, you will find that earning money has never been so easy, because you need to do nothing but invest to our plans, and we do everything remained. Just try us! Check our offers and join!
I deposited $50,000 in and got paid $2.5millions after 12 hours.
That is great hyip . what can I say? see my proof
Payment Proof
Date: 2010-07-27 21:55:40
From/To Account : U5354564 (PadHyip)
Amount : 2,500,000.00
Currency : LRUSD
Batch: 419718xx
Memo :

More Details

You can check the site paying or not

If you don't get paid from,please mailto:
I will return 200% of your deposit.You have no risk! Because I trusted them
So I can guaranteed. Never loss and No risk.

Anonymous said...

eeeek - spammy comments, can't you moderate?!!!

Chris said...

James - this is quite interesting, especially when you consider that Westpac's housing book alone represents over TWELVE times their tangible common equity. We recently wrote a letter on the housing market in the Land of Oz ( Our estimates have losses for WBC approaching one quarter of the banks equity if housing prices were to revert to normal . . . and this is ONLY looking at the banks NEW loans written in just the past three years. Wonder what's in the rest of their book?

No wonder they aren't happy about slowing lending. Problems predictably begin to appear as growth slows.

Dan Ferris said...

James. I thought you recently wrote of a study that showed equity investors see the bulk of returns after five years of holding...does that sound familiar?

Dan Ferris said...

James, didn't you recently write about a study that showed equity investors see the bulk of their returns in holding periods of five years or more?

Do I have that right? If so, I'd love to see what you wrote, and the study, if it's available.

Unknown said...

dan ariely actually tested this - students grading themselves... and most cheated!!
great to have you back! Your little book on financial behavior is awesome!

Neeraj Marathe said...

Hi James,
Can i have ur email id, if its ok with u? wanted to send u some stuff..
my email is

Unknown said...

Bernanke likes to remind everyone that he is an expert on the great depression and knows how to prevent it from happening again in the US. Apparently he is also an expert on Japan and its struggle with chronic deflation following its housing bubble in the 1980's. In fact Bernanke wrote an article in 2000 titled "Japanese Monetary Policy: A Case of Self-Induced Paralysis," where he goes on to lecture BOJ officials about what they could and should have done differently in order to to avoid a deflationary outcome. He goes on to postulate that the BOJ was not trying hard enough to stimulate the economy and that 0% interest rates are just one tool to beat deflation. The Fed Chairmen even goes so far as to assert that he knows how to escape a liquidity trap caused by 0% interest rates. The reason I bring this up is because it gives people a good idea of what Bernanke's next move may be. The US is dangerously close to falling into the dreaded "liquidity trap" as deflation takes hold and monetary policy loses its effectiveness.

Here are some of his suggestions to the BOJ:

darkmuse said...

Classroom observation. Trust worth it. It does not appear out of nowhere, it arises when we feel loved, protected.

research papers help

Zenchukovskiy said...

i've never heard about this. Marking your own homework is a very interesting experiment.

But when you finish school, and enter adult life, everything changes. You face the fact that other people evaluate your work. So if you want to get 'good marks', you should learn how to write a bibliography page

Anonymous said...

If they have the rule, it is because something similar happened to them to change their opinion. It is quite interesting article that xlpharmacy wrote about it.

Unknown said...

It so true ... I couldn't agree more. It seems that no one is learning from its mistakes. What is the point to settle such a thing ?
I saw recently that Westpac's housing book alone represents over TWELVE times their tangible common equity.
Nonetheless what is the objective to settle this rules if it not going to work ? Maybe something change their mind

Unknown said...

Here at this site really the fastidious material collection so that everybody can enjoy a lot. Mark Curry

JohnHarris said...

The trend of getting online education has been getting viral these days and happens to be the best idea. We are able to acquire every type of information these days with just one click 2018 Latest VMCE_V9 Real Exam Dumps.

Unknown said... provide easy, salesforce app builder exam questions secure and guaranteed methods to pass any IT certification with ease

Acumen Finance said...

Thanks for sharing superb informations. I’m impressed by the details that you’ve on this site. It reveals how nicely you understand this subject. Bookmarked this web page, will come back for extra articles.Please visit my web site Best Private Finance service provider.

Agung Sawen said...
This comment has been removed by the author.